Friday, October 08, 2004

Less-than-stellar jobs report 

The jobs report came in at 96,000 new jobs in the payroll survey, which is below the street estimate of 144,000 I reported earlier in the week. Also, the revision I discussed at that time did come showing that the payroll data had to be revised upward since March 2003, but for 233,000 jobs instead of the 288,000 that had been suggested in a White House memo earlier. The revisions are usually upward and 233k isn't any big deal.

There's a lot of talk whether the hurricane made a difference. The Bureau of Labor Statistics says no:

BLS made additional data collection efforts for the hurricane-affected counties. Establishment survey response rates in September were within the normal range for these areas as well as for the U.S. as a whole.

For weather conditions to reduce the estimate of payroll employment, people have to be off work for an entire pay period and not be paid for the time missed. While some employed persons were off payrolls during the survey reference period because of the hurricane effects, some jobs were added as part of recovery efforts. It is not possible to quantify precisely the net impact of this unusual string of severe weather events on the payroll employment data for September. At the national level, the severe weather appears to have held down employment growth, but not enough to change materially the Bureau's assessment of the employment situation in September.

It might have created some jobs, but this is of course the "broken window" fallacy. It is unlikely that any employment gains from the clean-up efforts would be long-lived. And this isn't one hurricane but four. I am hard-pressed to believe that there was zero impact from the hurricanes. And the range of estimates on this report ran from -10k to +200k, which means to me that this report had much more uncertainty than a normal report. I know I have a few readers who work at BLS (they're former students) and I hope to get more on this point. If their estimate is correct, then GDP growth should come in fairly modest for the third quarter (a back-of-the-envelope calculation I just did on the back of an envelope would put us at about 3.75%, which is right where the NABE estimate is.)

In the CNN report one economist points out that usually hurricanes do have a negative impact on job growth.
"Although the BLS failed to provide an estimate of what the hurricane did to this report, my research does show that in nine out of the last 10 largest hurricanes, payrolls softened by an average of 120,000," said Anthony Chan, senior economist with JPMorgan Fleming Asset Management. He said he would expect a bounce back in hiring next month.

Unfortunately for George Bush, that report occurs three days after the election. But let's be realistic here. We have electoral uncertainty, $50+ oil and increased tensions in Iraq. And four hurricanes. If we manage to come in with growth near 4% with all that going on, the underlying economy probably is quite healthy. Next GDP report -- the first for the third quarter -- comes the Friday before the election (and if you're reading this then, that link will take you right to it).